You might have not noticed but it is proxy season again. This is the time of the year when shareholder activism gets public attention with investors trying to help companies connect the dots between sustainability, growth opportunities, risk management and better performance overall.
And a busy proxy season it is. Ceres reports that the investors working with the organization have filed 91 resolutions with 78 companies so far. In February 2012, by comparison, Ceres reported 86 resolutions filed with 69 companies. Interestingly, this year seems not only busier, but also different in the challenges that are presented to the companies.
If last year, Ceres, which plays a prominent role in coordinating shareholders’ efforts, seemed to focus more on risk management, this year it puts more effort into promoting energy efficiency and clean energy strategies. “The world’s largest companies recognize that clean, efficient energy use makes good business sense,” said Mindy Lubber, President, Ceres. “Shareholders are encouraging these companies to adopt clean energy strategies so that they can capture short-term benefits and mitigate long-term risks.”
These shareholders include the California State Teachers' Retirement System (CalSTRS), Calvert Investments, Green Century Capital Management, New York City Office of the Comptroller and Presbyterian Church USA. This season they have filed resolutions with 13 corporations, including CF Industries, Citrix Systems, Dun & Bradstreet, Electronic Arts, Equity Residential, Fiserv, Kimco Realty, IBM, Public Storage, Rockwood Holdings, and Walter Energy.
According to Ceres, some of these resolutions have already generated results – for example, as a result of shareholder dialogues, companies in the IT and real estate sectors, including IBM and Public Storage, have agreed to increase reporting on their clean energy performance.
It makes perfect sense that investors want companies to become as energy efficient as possible. “It has become all too clear that smarter and cleaner energy consumption is critical not only to the long-term health and well-being of the public and the planet, but also to our portfolio companies,” said New York City Comptroller John C. Liu, who filed resolutions on sustainability reporting and energy use with couple of companies.
“For large energy users like IT firms, inefficiency can be costly to shareholders. Investing in efficiency is an excellent option for many companies, with internal rates of return often approaching 20 percent or more,” added Brian Rice, Portfolio Manager at CalSTRS, which also focused several of its filings on companies in the IT sector. “These resolutions are aimed at establishing clear goals for improving performance.”
This focus on energy efficiency initiatives is interesting on several levels. First, on the companies’ level, it is quite amazing that large corporations still need to be reminded that “investments in energy efficiency are an attractive way to manage rising energy costs” – this is supposed to be part of business 101, not just sustainability 101.
It was also interesting to see IBM, a company that usually is associated with smart sustainable solutions, on this group of laggards. In this case, the resolution requested IBM to set targets to increase renewable energy sourcing, but was withdrawn after the company positively responded to the resolution. “After the hottest year on record in the United States, we are pleased to see IBM commit to a rigorous approach to sourcing clean energy, which will help to reduce its greenhouse emissions,” said Leslie Samuelrich, Green Century Capital Management, lead filer of the IBM resolution.
Last, but not least, it’s worth looking at the investors’ side. While their push for energy efficiency and clean energy initiatives seems almost self-explanatory, it might look like they don’t ask companies to push the envelope too far, especially compared to the resolutions filed in last couple of years.
In 2011, for example, Ceres was focusing on the energy sector, reporting that “oil, coal and power companies see 50 percent increase in climate- and energy-related shareholder resolutions in 2011 proxy season.” In 2012, it was again the energy sector that seemed to be the main theme - “investors challenge 10 electric power companies on climate change and air pollution risks” and “investors challenge 18 oil and gas companies on climate change, hydraulic fracturing, and sustainability risks,” were the headlines of Ceres’ press releases.
But is this really the case? Well, actually this season is not so different with resolutions filed with 19 oil and gas companies, including Chevron, ExxonMobil and ConocoPhillips on various issues, from sustainability reporting to reviewing and reporting on climate risk exposures. The change, therefore, is apparently more due to the focus of Ceres rather than in the investors’ agenda, who still look very interested in “climate proofing” energy companies in various ways.
In any event, we can definitely expect another exciting proxy season with companies and shareholders debating on the intersection of sustainability and business. Hopefully, by the end of it, we’ll have more companies adopting their activist shareholders’ perspective on the path business should be taking forward, bearing in mind what NYC Comptroller John Liu said back in 2011, “Companies that continue the same outdated practices put both the environment and their shareholders at risk.”
Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.
Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.